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Posts Tagged ‘Landlord Equity Release Scheme’

Newlife Rekindle Their Unique Buy-to-Let Equity Release Plan

Thursday, April 25th, 2013

With a timely return to a buoyant buy-to-let mortgage market, newlife (formerly New Life Mortgages) have re-launched their unique ‘Landlord Loan’.


Originally released in 2006, the newlife Landlord equity release scheme was withdrawn a number of years ago, coinciding with a general drop in equity release applications & funding.


The newlife landlord lifetime mortgage is another welcome addition to the developing equity release sector, which is seeing a resurgence in lending with similar innovative products & lowest ever interest rates.


What is the landlord loan?

Effectively, the newlife Landlord Loan is a buy-to-let equity release mortgage. It is designed specifically for the over 55 age group, who are using rental property for investment purposes in order to help boost their retirement income.


Being able to release equity from their portfolios, the landlord loan could help finance more buy-to-let projects and also help with capital gains tax mitigation.


How does the landlord equity release scheme work?

Based on the principle of the roll-up lifetime mortgage, the buy-to-let equity release scheme helps landlords with rental properties withdraw equity tied up in their portfolios.


Normally strict rules apply to equity release schemes as the property concerned must be the main residence. However, newlife have bucked this trend & designed this landlord equity release plan around the rental market and have coincided this release with a 2nd home or holiday home equity release plan.


In essence, any UK landlord over the age of 55 with a qualifying buy-to-let property can release a percentage of the property value with NO monthly repayments necessary. There must be no mortgage present on the property; otherwise the existing mortgage will need to be repaid from the proceeds of the landlord loan.


The equity release landlord loan attracts a rate of interest at 6.55% (7.1% APR) and is fixed for the lifetime of the mortgage. The interest rolls-up on a monthly basis and is eventually repaid upon death or the last person.


The landlord scheme carries all the principles laid down by the Equity Release Council including a no negative equity guarantee, thus protecting the beneficiaries from ever owing more than the property value itself.


Qualifying criteria

Applicants must be 55 attained and have a buy-to-let property valuation of at least £150,000. The property must be in England & Wales and let on an Assured Shorthold Tenancy basis. A portfolio of upto 5 properties can be included, with a minimum loan of £25,000 and the maximum being £250,000.


How much can I borrow on the landlord loan?

The size of the release is determined by age & property value, therefore income verification is not required. Nevertheless, newlife will require the rental income to at least cover the interest charged in the first month of the term.


An example release could be illustrated by considering a male aged 65, with a rental property value of £200,000. The newlife landlord loan would release upto 23% of the property value – a maximum release of £46,000.

The range of LTV’s stretches from 13% at age 55, upto a maximum 42% once age 85 is attained.


Benefits for buy-to-let property owners

  • the release of equity is free of tax & can be spent in whatever way you choose
  • landlord equity release helps cash flow in retirement as you continue to receive rental income, but without having to make any monthly repayments
  • Open-ended mortgage with no fixed repayment date
  • Opportunity to restructure your property portfolio to provide additional retirement income
  • The lump sum could be used to settle any outstanding interest only mortgages still running due to failed endowment policies
  • Can be utilised as part of a divorce settlement where the matrimonial home is to be retained by one party
  • Help the funding of long term care by converting the main residence into a buy-to-let which can then provide a tax free lump sum and additional income to pay care costs
  • The opportunity presents itself now to delay the sale of a BTL property, when property prices may still have growth potential in the future
  • The tax free lump sum could be used to purchase an annuity or enhanced annuity which has its own tax advantages and provides additional income in retirement.
  • A fixed interest rate of 6.55% which means the future balance of the buy-to-let lifetime mortgage scheme will be known from the outset
  • Tax advantages arise whereby the property sale can now be postponed if a landlord loan is taken instead. This can then defer, or even avoid potential capital gains tax in the future
  • The landlord equity release plan is portable & can therefore be transferred to a new qualifying  property
  • Further advances can be considered after 3 years, with a minimum top-up of £10,000.


If you are a 55+ landlord and looking to release equity from you buy-to-let portfolio, then call Equity Release Supermarket today on 0800 678 5159.


*To obtain a quote you can visit our newlife landlord page by clicking here.


Breathing ‘New Life’ to Buy to Let Mortgages – The Equity Release Way

Tuesday, September 15th, 2009

Could equity release assist the resurgence in the buy to let market & reclaim it from the doldrums?


With the equity release market becoming more & more competitive, we focus on a particular product that has found itself a niche in this market.


You can’t have failed to notice in the past 6 months that ‘mortgages’ have become synonymous with terms such as ‘credit crunch’ & ‘falling property values’ & anything involving difficulty in obtaining credit.


The mortgage market is showing preliminary signs of improvement, but not before time & there is still a long way to go before its back on its feet.


One particular area in the financial services sector that has been associated with this slump is the buy to let mortgage. With blame being apportioned to these products having acted as part-catalyst to the advent of the credit crunch, lenders have had their fingers burnt & even withdrawn from lending on these products. It’s therefore difficult to see how they will recover in time & ahead of the general mortgage market.

However, all is not lost. You’ve heard the saying ‘being in the right place at the right time’ – well this could be one of those moments!


There has been a Landlord Equity Release scheme available for a number of years which has been drifting along without much prominence. This equity release scheme from New Life Mortgages enables landlords over the age of 55 to be able to assist them financially by releasing capital from their buy to let portfolios.


Buy to let landlords generally build their portfolio’s by relying on property values to increase. Once additional equity is built up via property value escalation, the landlord can then apply for a buy to let remortgage to raise additional capital. These new funds can then be used as a deposit towards to next purchase…& the momentum continues.


The problem now is that property values have fallen, hence this portfolio creation technique has been somewhat dismantled.


With the buy to let market having experienced massive growth over the past decade, thousands of mortgagees are now relying on the equity in their buy to lets and holiday homes for retirement purposes.

So how can equity release help?


Well, landlords over the age of 55 can now raise equity without having to sell their properties or even pay any monthly mortgage payments in the process. Instead, the interest is “rolled up” and the loan is repaid only on death, go into long-term care or the house is sold.


This equity release scheme has proved to be attractive to landlords who want to release equity in their portfolios in order to supplement their pensions. With the current depressed property market, landlords may be reluctant to sell & thereby delay the eventual sale in order for their families to benefit from future growth.


The New Life equity release scheme could be taken out on an unencumbered property in which the capital raised could be used in assisting with retirement plans or even the purchase of another buy to let property.


Alternatively, the plan could be used to repay an existing mortgage. Thus, by not having to make any further monthly mortgage payments & with the landlord still in receipt of rental income, this has the overall effect of increasing their retirement income.


Another benefit of this scheme is from a taxation viewpoint.


By taking out equity release, landlord’s could potentially avoid a capital gains tax (CGT) bill they would pay if they sold up — although they would be still be passing on a reduced tax liability to their heirs. This can also apply to inheritance tax.


New Life’s equity release scheme takes advantage of the Inland Revenue rule that profits are revalued when someone dies. When people die and leave their belongings to their family, or indeed anyone else, there is no CGT to pay at the time. When the property is eventually sold, CGT is based on the difference between the proceeds of the sale and the market value at the time of death.


Another perk for landlords is that the interest charged on the equity release can be offset against the tax on the rental income, even though the interest is rolled up.


The scheme is also available on holiday cottages and second homes, thus extending the markets potential.


Other benefits in brief are that the New Life equity release plan has no impact on the landlord’s main residence. This will leave it free from any potential legal charges on the property.


Finally, the landlord can raise commercial finance at a residential rate which is currently 7.25% compounded monthly.


Main features of the buy to let scheme are: –

·       Minimum age of the youngest must be 55

·       LTV’s start at 15%

·       Minimum loan £26,000

·       Minimum property value of £100,000

·       Rental Income must exceed the interest being charged

·       Never owe more than the value of the property

·       Early repayment charges are over 5 years


It is niche equity release products like this from New Life Mortgages that will instill further confidence in the current subdued property market & we look forward to further innovations in this sector.


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